June 19, 2020

USDCAD Open (6:00 am) 1.3583-87, Overnight Range: 1.3550-1.3614

• EU leaders debating proposed stimulus package
• Canada Retail Sales plunge 26.4% m/m in April
• GBPUSD slips as total UK debt reaches 100.05% of GDP
• US dollar opens in NY close to unchanged vs the majors

Percent change in US dollar since Thursday’s NY open

Source: Saxo Bank/IFXA

FX Recap and outlook:  The FX week is ending with a whimper.  The G-10 major currency pairs traded sideways and opened little changed from Thursday’s closing levels.  FX direction continues to be dictated by global equity price movements.  Central bank monetary policies, ballooning government deficits, ongoing COVID-19 second-wave outbreak concerns, and economic data play second fiddle to the Dow Jones Industrial Average and the S&P 500.

Wall Street closed flat, and Asia equity markets closed modestly higher.  European stocks are higher as are S&P futures, which distracted traders from second wave coronavirus risks.  Oil prices rose because Opec members, Iraq, and Kazakhstan promised to comply with agreed production cuts.

EURUSD traded in a tight 1.1200-20 range as the 27 leaders of EU met to debate the France/Germany €750 billion Recovery fund proposal.  Countries like Spain and Italy want grants with few restrictions while the so-called “frugal four” (Sweden, Denmark, Austria, and the Netherlands) are not thrilled with the idea. Prices popped to 1.1253 in NY trading, in part because S&P futures pushed higher.

GBPUSD dropped from 1.2455 to 1.2378 on the back of weak economic data, and bearish technicals, before bouncing to 1.2407 in NY trading. Ongoing concerns about a no-trade deal exit from the EU at the end of the year is another negative. Traders ignored the news that May Retail Sales rose 12% m/m, well-above the April loss of 18%.  Instead, the report that the UK debt exceeded GDP for the first time since 1963 weighed on prices.

Canada April Retail Sales data did not impact USDCAD

USDJPY remained on the defensive but traded in a narrow range.  Coronavirus fears, North Korea and South Korea tensions were offset by an uptick in US Treasury yields, which are above this weeks low.

AUDUSD and NZDUSD consolidated losses from Tuesday.  Both currency pairs are tracking broad USD dollar sentiment and are rangebound.

USDCAD continues to test, but fail to breach the May downtrend line which comes into play in the 1.3640-1.3650 area, which keeps the focus on support at 1.3340. April Retail Sales were ugly but a non-factor for traders.  The poor results are due to COVID-19 measures.  Firm oil prices will continue to act as a drag on USDCAD gains.

The US data cupboard is empty.

USDCAD Technicals:  The USDCAD technicals are bearish while prices are below 1.3650, looking for a break below support in the 1.3500-10 area to shift the focus to 1.3340. A topside breach of 1.3650 targets 1.3840   For today, USDCAD support is at 1.3510 and 1.3470.  Resistance is at 1.3620 and 1.3650. Today’s Range 1.3540-1.3620

Chart: USDCAD daily

Source:  Saxo Bank